Microsoft needs to get its mobile apps ecosystem right. There's also scope for aggressive pricing to gain market share in mobile devices. 5% market share is just not cutting it - it needs to get to 20-30% at least to stay viable.

I might not be Microsoft's target demo, but I like what I have seen from Nadella. If the CEO’s job is to be the face of the company to The Street, then Ballmer wasn’t hacking it. I never really understood what he was doing other than trying to fix an organization that was attacking itself from within. I don’t think there is much new in Nadella’s strategy but there seems to be more focus and clearer communication. One key positive I see is in looking at the OS as a vehicle to deliver content that generates revenue instead of a source of revenue in itself. MS doesn’t have the same luxury Apple has with their closed ecosystem so they can’t build big profits into the hardware (i.e. Surface or Nokia phone). They can however generate a huge revenue stream through licensing apps like Apple does and they have a similar advantage to Google due to the number of white box vendors ready to sell Windows devices. Add that to a very active developer ecosystem which has already become WAY more open-source friendly and I like what I am hearing. I think Nadella “gets it”.

People may not trust the cloud but look at the direction every other company is going. Microsoft isn't unique with their push to the cloud they are just a little more transparent about it. I don't remember hearing much "cloud" talk when Apple pushed Mobile.Me accounts but that was exactly what the push was. Google doesn't have one application that isn't in the cloud and that's not hurting them. I think when we say people are afraid of the cloud we are saying that people are used to Microsoft doing business as usual and any change is unsettling.

This is a great bird's-eye view of the complex state of Microsoft. Nadella is doing a good job of creating a new narrative with what he's inherited. And he has Microsoft's deep pockets and no hard deadline in his favor (Microsoft doesn't really do deadlines). But it's becoming clear that the Nokia buy -- and the integration of 25,000 new employees -- is a big old snafu. It's a Ballmer decision that Nadella must figure out. Nokia's assimilation gets even more perplexing as Nadella further explains his vision of cross-platform software, "ubiquitous Windows", and cloud infrastructure and support with Azure. From all he's said, Microsoft future does not involve manufacturing mobile hardware.

"'Ambient intelligence' is not a phrase that makes me feel warm and fuzzy. Instead, it makes me think about security and privacy."

In addition to my other comment, I should add that even if "ambient intelligence" has a bit of a 1984 vibe, it's not that different from what a lot of other companies are saying. At a high level, Cisco paints basically the same vision for the future, for example, though Cisco has learned to emphasize that the user is in control, that services must be opt-in, and so forth. But even if the messaging is a bit different, the point is-- most huge tech companies are hanging future strategies on some version of this "ambient intelligence" concept. Apple, Google, IBM, and on and on. "Ambient intelligence" is basically the intersection of the Internet of Things, and big data, and few experts believes this basic formula isn't worth trillions. We might not call it "ambient intelligence" in the future, but whether our sense of privacy is ready for it or not, the concept is coming. The question, for Nadella, is whether things like SQL Server, Windows and Excel will be at the center of it.

Good point. No doubt, Microsoft will have to tackle privacy concerns. A lot of people don't trust the cloud, and as envisioned by Nadella, the cloud is Microsoft's future.

Cortana will be a sort of test case. It knows as much about you as you care to share. If people find it useful, they'll entrust it with more info, and Microsoft might begin to allay some concerns. If people find it to be mostly a gimmick, they'll use it for fewer things, and Microsoft's reputation for privacy won't necessarily benefit. Cortana alone won't fully address this problem by itself, of course-- but like I said, it's a test case, a sort of litmus test. If average people won't share details with a smartphone assistant, how on earth will they allow sensor-embedded, data-slurping objects to surround them?

I'm with Lorna on this one. For at least some segment of customers, Ballmer's Microsoft clearly left a bad taste, both in terms of licensing policies, and his mostly late and ineffectual attempts to cash in on consumers. But I think the anti-Microsoft stuff is getting a bit mythologized. If the company is as allegedly doomed as some people seem to think, its financials are inexplicably sound-- not only because of long-term deals, customer lock-in and accrued wealth, but also because a lot of core assets have performed excellently. And Microsoft didn't force 12 million people to download Office for iPad during its first week. We don't know how many of those have translated into Office 365 subscriptions, but growth so far has been strong, and Microsoft seems satisfied with recent conversion rates.

Yeah, Windows 8.1 doesn't have many passionate defenders, Microsoft's licensing is byzantine, and so on—but it's just as easy to point to Microsoft's unequivocal success as it is Microsoft's most infamous failures. And a lot of people forget that Microsoft is more than Windows and Office. SQL Server hauls in something like $5 million per year, for example, and though I'm sure not everyone is thrilled about Microsoft's cloud-centricism, the company hasn't left the old world in the dark; they emphasize hybrid models as much as anybody because they realize most people need a bridge to cloud services, or will only use them in specific ways.

This isn't any kind of Windows fanboy-ism, just to be clear. Cost being no object, I'd choose an Apple product over a Windows product for most things I do (but cost is of course an object). I've also written more than a few critical words about Windows 8 and the Surface line's mass market appeal. But I think Nadella has handled the cards he was dealt as well as could be expected. He's also been relatively candid about Microsoft's challenges, and he's presented a much clearer vision for leveraging Microsoft's existing user base to launch new products, both for Windows and for other platforms. Nadella didn't build yesterday's Microsoft, and there's plenty of reason to think he'll build a different Microsoft for tomorrow. I think it's telling that so much criticism focuses on what happened before Nadella took over, rather than the numerous announcements Microsoft has made in the last month.

Tom bring up a point with "thinking about users." Apple cracked the UI question first, and has only gradually figured out supporting software and infrastructure. Microsoft has the infrastructure but is still figuring out the user-facing side, at least with Windows. This is one of many reasons that Microsoft isn't out of the woods. But I like said, I think Nadella knows that, and I think Myerson (the new OS boss) does too. I don't think Nadella is Steve Jobs, but he doesn't have to be. Microsoft isn't in nearly as bad a shape as Apple was before Jobs came back.

I wouldn't be so quick to count Microsoft out. Millions of people are comfortable with Windows and Office, and the company has the $$ to tweak its OS for use across platforms and play the waiting game. Heck, it has the money to jettison Win8 altogether and try again. I suspect the market will like the story Nadella is telling.

As InformationWeek Government readers were busy firming up their fiscal year 2015 budgets, we asked them to rate more than 30 IT initiatives in terms of importance and current leadership focus. No surprise, among more than 30 options, security is No. 1. After that, things get less predictable.